Seminar 14 - Measuring housing prices over the long run (correctly) – an index for Dublin 1900-2015

Despite the importance of housing in macroeconomic fluctuations, underscored by the Great Recession starting in 2008, there remains a dearth of housing market data prior to the 1970s, thus depriving social scientists of a wealth of case studies from which to draw insights. Moreover, those long-run series that do exist are typically based on small samples and elementary analytical techniques, meaning they may be of limited reliability.

This paper adds to the body of knowledge on housing prices prior to the 1970s, constructing for the first time a housing price index for Dublin, Ireland, stretching back to 1900. Given the detailed micro-level nature of the dataset, it is possible to use modern methods of mix adjustment, in particular the hedonic regression technique, to construct a constant-quality index. By being able to compare this with indices based on simpler measures used in much of the literature so far, a significant contribution of this paper is the light it sheds on the limitations of existing house price indices, such as those for the USA extending back to 1890.

In addition to this methodological contribution, trends in the Dublin market are worthy of study in their own right. Ireland's economic history since 1900 contains a number of shocks and dramatic policy changes. These include factors common to other economies, such as the Great War, the end of the first wave of financial globalization and the rise of the second, but also factors specific to Ireland, including the War of Independence and Civil War, and a switch from autarky to openness, as well as the Celtic Tiger period and a subsequent economic collapse. With a constant-quality house price index, it will now be possible to include house prices in quantitative analyses of Irish history.

Speaker:

Dr Ronan Lyons, Trinity College Dublin

Biography:

Ronan Lyons is Assistant Professor of Economics at Trinity College Dublin and an applied urban economist and economic historian. His doctoral thesis at Balliol College Oxford was on the economics of Ireland’s property market bubble and crash. His areas of focus include long-run housing markets and sustainable and behavioural aspects of real estate markets. His first book, Next Generation Ireland (co-edited with Ed Burke), was published in 2011, and he has published in or refereed for a range of journals, such as Energy Economics, the European Review of Economic History and Oxford Economic Papers. He is a frequent contributor to national and international media on the Irish housing market and is author of the quarterly Daft.ie Reports. He tweets as @ronanlyons.

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